Warning: The estimates in this publication are indicative. They are presented to give an indication of the magnitude of the impacts of proposed change to Australia's macro-economic accounts. All estimates are subject to refinement and revision in the quarterly balance of payments to be published on 8 December 2009.

BALANCE OF PAYMENTS

From the August 2009 issue of International Trade in Goods and Services (5368.0) and the September quarter 2009 issue of Balance of Payments and International Investment Position (5302.0), data will be compiled on the basis of the Balance of Payments and International Investment Position Manual sixth edition (BPM6). In addition, the results of a number of data quality investigations will be implemented. These changes will be backcast through the historical series to create a time series which is as continuous as possible.

New series to be introduced with BPM6 include pension funds service charge, reinvested earnings on investment fund shares and other volume changes due to migrants' change in residency. A range of series will be revised including transport freight services, all insurance service charges, financial services, financial intermediation services indirectly measured (FISIM) and personal transfers.

THE BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION

Table 1 summarises the impact on key aggregates for 2007-08 of implementing BPM6. The reasons for the most significant changes are described in the following sections.

1 Summary of changes to Balance of Payments and International Investment Position, current prices(a)

BPM6 Label

BPM5 basis ($m)

BPM6 basis ($m)

Difference

% change

CURRENT ACCOUNT

-72 504

-72 987

-483

-1

Goods and Services

-23 561

-24 579

-1 018

-4

Net Goods

-22 346

-21 894

452

-

Goods credits

182 818

182 952

134

-

Goods debits

-205 164

-204 846

318

-

Net Services

-1 215

-2 685

-1 470

-

Services credits

51 035

50 645

-390

-1

Services debits

-52 250

-53 330

-1 080

-2

Net Primary income

-48 601

-48 254

347

-

Primary income credits

42 022

43 035

1 013

2

Primary income debits

-90 623

-91 289

-666

-1

Net Secondary income

-342

-154

188

-

Secondary income credits

5 264

6 058

794

15

Secondary income debits

-5 606

-6 212

-606

-11

CAPITAL ACCOUNT

2 167

-232

-2 399

n.a.

FINANCIAL ACCOUNT

68 148

72 206

4 058

6

Financial account assets

92 260

85 003

-7 257

-8

Financial account liabilities

160 408

157 209

-3 199

-2

INTERNATIONAL INVESTMENT POSITION

Total foreign assets

1 048 612

1 069 706

21 094

2

Total foreign liabilities

1 724 482

1 729 944

5 462

-

- nil or rounded to zero (including null cells)

(a) Balance of Payments signage presented in this table according to BPM6 presentation

THE CURRENT ACCOUNT

The Current Account presentation under BPM6 will be similar to the presentation currently published, except that income and current transfers will be replaced by primary income and secondary income, respectively.

The introduction of BPM6 will increase the current account deficit, in current prices, for 2007-08 by about $0.5 billion net with:

the deficit on goods decreasing about $0.5 billion;

the deficit on services increasing about $1.5 billion;

the deficit on primary income decreasing about $0.4 million; and

the deficit on secondary income decreasing about $0.2 billion

The gross impacts will be larger than the above net impacts although some of the changes, such as some components moving between goods and services, will have a minimal net impact.

The impacts on the current account balances are summarised below for 1994-95 to 2007-08 in table 2 and figure 1.

Revisions to goods credits (exports) as a result of BPM6 and the data quality investigations mainly impact the non-rural goods category. The overall impact is not significant, although the size of the impact varies from year to year. Between 1994-95 and 2007-08 the size of the revisions ranges between -$390 million and +$163 million.

The revisions will result from:

goods subject to merchanting will be recorded under goods credits (merchanting had been recorded as a service) and incorporating a different definition of net merchanting.

repairs on goods no longer will be recorded as goods (included in services and named maintenance and repair services n.i.e.).

goods for processing no longer will be recorded as goods (the processing component is included in services and named manufacturing services on physical inputs owned by others).

goods procured in ports by carriers will be reviewed and reclassified from the other goods category to the non-rural goods category under general merchandise.

relatively small revisions as a result of data quality investigations.

All goods debits (imports) series will be revised with the introduction of BPM6 and the data quality investigations. The overall impact will not be significant, although the size of the impact will vary from year to year. Between 1994-95 and 2007-08 the size of the revisions ranges between -$55 million and -$452 million.

The revisions will result from:

repairs on goods no longer will be recorded as goods (included in services and named maintenance and repair services n.i.e.).

goods for processing no longer will be recorded as goods (the processing component is included in services and named manufacturing services on physical inputs owned by others).

goods procured in ports by carriers will be reviewed and reclassified from the other goods category to the intermediate and other merchandise goods category under general merchandise.

goods will be valued on a Customs Value basis from 1989 onwards rather than on a Free on Board basis. Previously the Customs Value basis had only been used from 2006 onwards.

Introducing revised standards and results of the data quality investigations will have a greater impact on services than on goods in both absolute and percentage terms. The size of the impact varies from year to year. BPM6 introduces a new series, pension funds service charge, and a number of series will be revised including transport freight services, insurance service charge and financial services including financial intermediation services indirectly measured (FISIM).

The revisions will result from:

the exclusion of merchanting services (credits only).

the inclusion of maintenance and repair services n.i.e..

the inclusion of manufacturing services on physical inputs owned by others.

introduction of new or revised models for estimating:

pension funds service charge,

insurance service charge,

transport freight services (debits),

financial services including FISIM.

In addition, more detailed services classifications will be introduced to align with the Manual on Statistics of International Trade in Services and the Extended Balance of Payments Services classification.

Between 1994-95 and 2007-08, the impact on services credits will range between -$435 million and +$162 million (table 5). The major changes will be due to the removal of merchanting services and the introduction of new models for: insurance service charge; pension funds service charge; and financial services including FISIM.

Between 1994-95 and 2007-08, the impact on services debits will range between +$265 million and +$1,080 million (table 6). The major changes will be due to the introduction of: new models for transport freight services; insurance service charge; pension funds service charge; and financial services including FISIM; and the inclusion of maintenance and repair services n.i.e..

In most years services debits will increase more than services credits.

Income and current transfers will be replaced by primary income and secondary income, respectively.

PRIMARY INCOME

The changes to primary income will derive primarily from the inclusion of reinvested earnings on investment funds, detailed in chapter 9, together with new or revised models for insurance, pension funds and FISIM as detailed in chapters 10 to 12. Table 7 shows that net primary income will increase by about $350 million (-0.7%) in 2007-08.

7 Primary income, current prices

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Primary income

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Net primary income (BPM5)

-18 117

-19 533

-19 151

-18 091

-18 430

-18 249

-18 737

-19 667

-22 195

-23 840

-33 330

-37 458

-45 433

-48 601

Net changes to Reinvested Earnings

305

180

54

-124

-436

-198

-141

15

411

-10

-150

-232

146

205

Net changes to FISIM

-56

5

22

-7

19

23

113

42

21

53

-31

-85

-95

-76

Net changes to pension income

33

34

32

41

78

65

55

28

69

80

96

175

204

177

Net changes to insurance income

-4

-8

-4

-8

-11

-8

-9

-8

-12

-20

-37

-25

-22

-4

Net changes to CoE

9

11

13

15

18

22

25

25

31

36

38

48

61

45

Net primary income (BPM6)

-17 830

-19 311

-19 034

-18 174

-18 762

-18 345

-18 694

-19 565

-21 675

-23 701

-33 414

-37 577

-45 139

-48 254

Figure 6 - Net changes to primary income, current prices

SECONDARY INCOME

The term secondary income will be introduced with BPM6 with further dissection by type of transfers to be recorded as supplementary items. Changes to secondary income will be the result of:

the workers' remittances item will be replaced with personal transfers, which is broader in scope, and workers' remittances becoming a supplementary item. Workers' remittances debits will be the only component of personal transfers currently measured and a new methodology will be introduced. An Information Paper : Estimation of Workers' Remittances based on Balance of Payments Manual & International Investment Position sixth Edition (cat.no. 5302.0.55.003) describing the new methodology was released on 14 August 2009;

the other transfers item will be named other current transfers. This item has two components:

non-life insurance transfers component which will be named non-life insurance premiums and claims and include the results of a revised methodology (see chapter 11)

other revisions which will be introduced to the other component of other transfers including changes to social contributions and social benefits from the introduction of pensions into the international accounts (see chapter 10).

Net secondary income under BPM5 standards was -$342 million, under BPM6 this will increase to -$154 million (table 8).

8 Changes to secondary income, current prices

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Net secondary income (BPM5)

-323

64

-21

22

-749

218

32

90

-45

-255

-369

-649

-339

-342

Net change to Net secondary income

587

589

583

463

1 198

141

460

489

603

352

259

-404

-302

188

Net secondary income (BPM6)

264

653

562

485

449

359

492

579

558

97

-110

-1 053

-641

-154

Secondary income credits(BPM5)

3 024

3 292

3 540

3 993

4 498

4 625

4 453

4 381

4 297

4 191

4 268

4 602

5 155

5 264

Net change to Secondary income credits

782

810

2 164

1 923

1 598

1 437

1 240

795

910

701

685

619

671

794

Secondary income credits(BPM6)

3 806

4 102

5 704

5 916

6 096

6 062

5 693

5 176

5 207

4 892

4 953

5 221

5 826

6 058

Secondary income debits (BPM5)

3 347

3 228

3 561

3 971

5 247

4 407

4 421

4 291

4 342

4 446

4 637

5 251

5 494

5 606

Net change to Secondary income debits

195

221

1 581

1 460

400

1 296

780

306

307

349

426

1 023

973

606

Secondary income debits (BPM6)

3 542

3 449

5 142

5 431

5 647

5 703

5 201

4 597

4 649

4 795

5 063

6 274

6 467

6 212

Figure 7 - Net secondary income, BPM5 and BPM6 basis - current prices

FINANCIAL ACCOUNT

Table 9 summarises changes to the financial account as a result of:

a new model for insurance technical reserves. Changes in insurance technical reserves due to changes in the prepayments of insurance premiums and changes in claims incurred but not yet paid will be captured as transactions in the financial account.;

pension fund assets attributable to non-residents are explicitly modelled and changes due to contributions and the payment of benefits will be included in the financial account;

reinvested earnings on investment funds will be explicitly modelled and included in transactions in the Financial account as an offset to the corresponding income in the primary income account; and

a new model for the treatment of changes due to migration. When migrants become resident of a new country they are assumed to leave assets in their former country of residence. This establishes an international investment position. Assets that are progressively transferred to the new country of residence will be captured as transactions in the financial account. This will replace the migrants transfers item in the capital account.

Further details of these changes are provided in chapters 10,11 and 13. In addition, the financial account will be revised due to BPM6 presentation being on a gross basis (directional principle) and re-balancing of the accounts.

9 Transactions in the Financial Account

Transactions

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Total Foreign Assets (BPM5)

-4 123

19 024

19 929

16 692

19 139

24 478

50 943

50 038

29 374

43 936

-39 664

100 625

136 404

92 260

Reinvested earnings

470

424

304

287

98

299

372

610

840

673

580

580

1 005

980

Insurance Assets

45

14

104

178

-17

8

65

48

82

83

-96

44

-79

-137

Pensions Assets

287

324

359

535

640

628

351

300

451

602

725

1 263

1 131

528

Changes to assets due to migration

-1 454

-1 753

-1 810

-1 763

-1 943

-2 320

-2 859

-2 990

-3 184

-4 293

-5 297

-6 341

-7 852

-8 628

Total Foreign Assets (BPM6)

-4 775

18 033

18 886

15 929

17 917

23 093

48 872

48 006

27 563

41 001

-43 752

96 171

130 609

85 003

Total Foreign Liabilities (BPM5)

24 298

36 839

37 482

41 334

49 252

55 535

67 223

69 188

66 845

88 624

16 131

152 590

193 470

160 408

Reinvested earnings

165

244

250

411

534

497

513

595

429

683

730

812

860

775

Insurance Liabilities

60

193

141

149

50

-54

75

197

60

-77

-155

-490

-350

1

Pensions Liabilities

81

76

96

138

238

244

-29

-119

9

149

199

623

475

-296

Changes to liabilities due to migration

-499

-580

-629

-674

-772

-948

-1 172

-1 312

-1 461

-2 196

-2 506

-2 687

-3 250

-3 679

Total Foreign Liabilities (BPM6)

24 105

36 772

37 340

41 358

49 302

55 274

66 610

68 549

65 882

87 183

14 399

150 848

191 205

157 209

Financial Account (BPM5)

28 421

17 815

17 553

24 642

30 113

31 057

16 280

19 150

37 471

44 688

55 795

51 965

57 066

68 148

Financial Account (BPM6)

28 880

18 739

18 454

25 429

31 385

32 181

17 738

20 543

38 319

46 182

58 151

54 677

60 596

72 206

Both pension assets and changes in assets due to migration are highly correlated to migration estimates. Australia usually has higher numbers of permanent immigrants than residents departing permanently. This is particularly the case in 1997-98 and between 2004-05 and 2007-08 reflected in the increase in transactions for pension assets held and changes in assets due to migration over this period.

The changes as a result of BPM6 will decrease Australia's net international investment liability by about $13.8 billion (2%) at 30 June 2008. The changes were driven by the following:

insurance technical reserves will now be explicitly modelled and included in the international investment position;

pension fund assets attributable to non-residents will be explicitly modelled and included in the international investment position; and

a new model for the treatment of changes due to migration. When migrants become resident of a new country they are assumed to leave assets in their former country of residence which will establishe an international investment position.

Further details are provided in chapters 10,11 and 13.

10 International Investment Position

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Assets

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Total Foreign Assets (BPM5)

184 783

193 387

229 768

299 528

325 163

426 176

488 144

518 514

529 797

638 398

643 626

830 906

1 016 566

1 048 612

Insurance Assets

383

456

510

567

587

566

595

665

714

900

1 049

1 135

1 240

1 403

Pension Assets

1 590

1 919

2 200

3 186

3 482

3 548

3 701

4 089

5 105

6 829

9 146

12 664

14 491

12 276

Changes to assets due to migration

639

743

711

701

828

995

1 243

1 165

1 346

1 964

2 222

2 747

3 403

3 483

Total Foreign Assets (BPM6)

187 395

196 505

233 189

303 982

330 060

431 285

493 683

524 433

536 962

648 091

656 043

847 452

1 035 700

1 065 774

Total Foreign Liabilities (BPM5)

440 293

468 698

519 924

596 466

646 818

754 946

853 701

883 695

945 701

1 091 724

1 150 064

1 372 779

1 644 695

1 724 482

Insurance Liabilities

1 001

1 194

1 335

1 484

1 534

1 480

1 555

1 752

1 812

1 735

1 580

1 090

740

741

Pension Liabilities

187

219

267

312

357

440

470

489

514

611

696

852

1 119

1 076

Changes to liabilities due to migration

211

246

256

279

329

413

506

537

616

1 053

969

1 145

1 403

1 517

Total Foreign Liabilities (BPM6)

441 692

470 357

521 782

598 541

649 038

757 279

856 232

886 473

948 643

1 095 123

1 153 309

1 375 866

1 647 957

1 727 816

Net International Investment Position (BPM5)

255 510

275 311

290 156

296 938

321 655

328 770

365 557

365 181

415 904

453 326

506 438

541 873

628 129

675 870

Net International Investment Position (BPM6)

254 297

273 852

288 593

294 559

318 978

325 994

362 549

362 040

411 681

447 032

497 266

528 414

612 257

662 041

As is the case with the financial account, pension assets and changes in assets due to migration are highly correlated to migration estimates. Australia usually has higher numbers of permanent immigrants than residents departing permanently. This is particularly the case between 2004-05 and 2007-08 reflecting the increase in pension assets held and changes in assets due to migration over this period.

Unless otherwise noted, content on this website is licensed under a Creative Commons Attribution 2.5 Australia Licence together with any terms, conditions and exclusions as set out in the website Copyright notice. For permission to do anything beyond the scope of this licence and copyright terms contact us.